The recession never ended for most consumers, not just in the U.S. but around the world. If consumer expenditures do not accelerate in the future, the recession will last longer. In this case, perception is as critical to the world’s economic future as anything else.
The cover of the Nielsen Global Online Consumer Confidence Survey for the third quarter shows a picture of a woman worrying over bills. She may live in the U.S. or parts of Europe. The study shows that 62% of consumers around the world believe their countries are in recession. The figure is only 60% in the U.S. The nations in which consumers are more sanguine include China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Saudi Arabia, Thailand and the UAE. That is predictable. The people in these nations believe they have bright futures because the economies of their countries are expanding quickly.
This research is another in a long line of data that shows Americans view their situation differently from Wall St. analysts, the White House and many economists. Most of these have expressed optimism recently. Unemployment for October is expected to improve. Third-quarter GDP was higher. Recent corporate earnings reports have been good. But, with those earnings reports are comments that most companies will not add workers. They are too “cautious.”
The consensus of mainstream economist forecasts is now that fourth-quarter GDP will be strong. Early next year will be stronger, especially if the federal government extends tax credits and unemployment insurance. There is no guarantee either of those programs will be extended. GDP growth will flag if they are not.
The consumer’s confidence is at a tipping point now. The Nielsen survey looks back, not forward. The best litmus test of the current quarter will be whether Americans are suddenly optimistic enough to open their wallets for the holiday season. That will be as good a signal as any that many consumers believe the recession has ended. Absent that spending, the Nielsen figures will not change.
Douglas A. McIntyre